Gold bags new all-time high in Pakistan, continues meteoric rise

• Gold rises to fresh record high of Rs171,400 per tola.
• Investors are scurrying for safe haven after a softening rupee.
• Silver prices remain unchanged at an all-time high.

Gold rose to a fresh record high of over Rs171,000 per tola on Thursday, with investors scurrying for a safe haven after a softening rupee and bleak economic data underlined the shaky pace of recovery.

All Pakistan Sarafa Gems and Jewellers Association (APSGJA) released data showing that gold prices rose by Rs500 per tola and Rs429 per 10 grams to settle a historic high of Rs171,400 and Rs146,948.

Meanwhile, silver prices remained unchanged at an all-time high of Rs1,990 and Rs1,706.10.

The association mentioned that although gold hit an all-time high in Pakistan, its price still stood below cost. Gold is over cost by Rs3,000 per tola compared to its price in Dubai.

The local prices are based on rupee-dollar parity and international rates. According to market practice, local prices of gold usually go down on the rupee's appreciation against the US dollar and rising prices of commodities in the international market.

Rupee depreciation against the US dollar triggered a rally in the gold market which led to an increase of Rs8,350 per tola in the last eight sessions.

Commodities experts cite a shortage of US currency as the major reason behind the constant increase in gold prices in the local market.

“Investors want to invest in the dollar because of the rising difference between the open market and the interbank market rate, which is around Rs20-30; however, despite the significant difference dollar isn't available and people are concerned about the financial situation in Pakistan and chances of default,” he explained the reason behind sudden shift in investors focus.

He added that because of the speculations that the dollar can reach 350-400 against the rupee; investors were trying to invest in the precious commodity.

“However, due to its [dollar] shortage they have shifted their focus toward gold as the price of the yellow metal is also rising in the international market,” Agar maintained.

In the international market, gold price retreated more than 1%, falling to their lowest in a week, as the dollar strengthened after the US Federal Reserve signalled higher interest rates for a longer period.

The price settled at $1,778 after a decline of $30 per ounce.

The Fed raised interest rates by half a percentage point on Wednesday and projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023.

Gold is traditionally considered an inflation hedge but higher interest rates dim bullion’s appeal by increasing the opportunity cost of holding the non-yielding metal.

— Additional input from Reuters